Caterpillar's Crawl to Control

Caterpillar's Crawl to Control

When it comes to beating unions, companies--and Wall Street--can be very, very patient.

If you saw the ghost of Joe Hill floating around the union halls in Illinois two weeks ago when members of United Auto Workers voted overwhelmingly to reject a new contract offer from Caterpillar, you could have been forgiven. In an era of quality teams and free-agent workforces, the UAW vote was a throwback to an era of union militancy. What it wasn't, though, was a throwback to an era of union power. In Illinois, as almost everywhere else, it's the company that rules.

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The Caterpillar-UAW struggle is the longest running labor-management confrontation of the 1990s and is also, unsurprisingly, the most bitter. The fight began with a six month walkout in 1991-1992 that ended when Cat threatened to hire replacement workers. In the years since, it has featured picket line violence by both strikers and Cat security guards, scores of unfair labor practices by the company, another 17 month strike from June 1994 to December 1995, and now two resounding rejections of Cat contracts by UAW workers. Shots have been fired into Cat executives' windows, even as the company has fired union members for distributing leaflets, wearing pro-union T-shirts, and singing on the assembly line.

The 12,000 UAW members have been working without a new contract since they returned to the factories more than two years ago. That means they have been working under company imposed terms, and turning down Caterpillar's latest offer means they will continue to work under those terms for the foreseeable future. It's a measure of just how angry Cat workers are that they would rather toil along without a contract than accept one that feels as if, as the Washington Times so bluntly put it in a headline, "The UAW gives in to Caterpillar."

The most concrete reason for the 58 percent vote against the new contract was the fate of the more than 200 workers whom Caterpillar had fired for "disciplinary" reasons during the last four years. While some were reinstated, often at the orders of the National Labor Relations Board, 160 still remain out of work. In its latest offer the company said it would reinstate 110 of these, and the fate of the remaining 50 would be placed in the hands of independent arbitrators.

Caterpillar did not, of course, make this offer out of the goodness of its heart. In exchange for the reinstatements, the union agreed not to impose fines or other sanctions on the 4,000 UAW members who crossed picket lines during the 1994-1995 strike. Even more importantly, at least from a financial angle, the union agreed to drop the 441 complaints of unfair labor practices it has filed with the NLRB. Even if only a small percentage of those allegations are true, the cost to the company in back pay and fines could be immense.

Still, Caterpillar's about-face was not sharp enough for the UAW rank and file, which focused not on the 110 who would be coming back to work but on the 50 who would not. As one leader of the opposition to the contract told the Los Angeles Times, "This thing doesn't end until we all go back." Solidarity Forever! Is John Reed somewhere in the house?

From one angle, the shortsightedness of the rank and file seems extraordinary. The new contract, while hardly lavish, did provide for small pay raises, plus cost-of-living increases. It also offered a considerable improvement in pension benefits and individual job security through 2004. For 12,000 workers to toss all that away because of what might happen to 50 workers seems to make no sense. But then, it's clear that what's now at stake for many Cat workers is not so much another dollar an hour raise as an idea of how a company is supposed to treat its workers.

Remember, too, that Cat management also believes those 50 workers important enough to justify tearing up a perfectly good contract. You can understand viscerally why it's hard for workers to vote for their own interests while their friends remain in limbo. It's harder to understand why Cat management is so insistent on not rehiring them that it's willing to risk huge NLRB fines to avoid doing so. But while from a short-term dollars and cents angle reinstating the workers may make sense, throughout its struggle with the UAW, Caterpillar has made its decisions with one long-range goal in mind: consolidation of its control over the workplace. It's overstating the case to say that Caterpillar has sought to break the union, but it's not overstating the case by much. And in that context, the symbolism of the 50 workers becomes just as important to Caterpillar as to the UAW. Their fate is a sign of which side has real power. Unfortunately for the UAW, there really isn't much question about which side does.

I n the past fiscal year, Caterpillar reported record profits of $1.7 billion. Throughout the 1994-1995 strike, the company kept reporting record quarterly earnings, in part because so many union members became scabs, in part because management personnel helped work the lines, and in part because the UAW represents just a fifth of Caterpillar's global workforce. The company has reinvented itself as an exemplar of lean production and now dominates its major competitors. In the last two years, Caterpillar has announced the opening of five new production plants. All of them are opening in right-to-work states in the South and the Midwest. What leverage the UAW has, then, shrinks every day.

What's crucial to understand about Caterpillar, though, is that its success in defeating the UAW in the 1990s was not simply the product of those larger trends--global competition, technology, etc.--that everyone points to. It was also the product of a coherent strategy for creating a more flexible, lower-cost workforce, a strategy that only worked because Cat was willing to endure a long strike and reduced profits (at least $100 million in 1991-1992) in order to get what it wanted.

Wall Street also saw the losses as a kind of investment. Caterpillar's share price did take a little hit in 1991, but since 1994 it has risen steadily. Across the board, in fact, investors are willing to overlook short-term losses due to strikes if they feel that a company's hard line will pay off in lower costs down the road. General Motors, for instance, lost $460 million to strikes in 1997, but investors treated the costs as a kind of "extraordinary charge" and valued the company as if the losses had never happened. The familiar cliché about Wall Street is that it's only concerned about the latest quarter. But when it comes to taking on unions, that cliché is a canard. As the UAW members at Caterpillar have learned, if the stakes are high enough, Wall Street can be very, very patient.